INTRODUCTION AND PROCEDURAL HISTORY
THE RECORD SUPPORTS THE MPS AMENDMENT TO THE PROPOSED MERCURY RULE
A. The Proposed Mercury Rule is Consistent with State Law
B. The Proposed Mercury Rule is Consistent with Federal Clean Air Act
2. The MPS is Lawful Under the Commerce Clause
a. The MPS is a Permissible Even-Handed Regulation that Does Not
Discriminate Against Interstate Commerce
IN THE MATTER OF:
RO6-25

IN THE MATTER OF:

)

PROPOSED NEW 35 ILL. ADM. CODE 225

)

CONTROL OF EMISSIONS FROM

)

LARGE COMBUSTION SOURCES

)

R06-25

(Rulemaking

Air)

NOW COME Ameren Energy Generating Company, AmerenEnergy Resource

Generating Company, and Electric Energy, Inc. (collectively "Ameren"), by their attorneys,

McGuireWoods LLP, and submits these Post Hearing Comments in support of the proposed 35

Ill. Adm. Code Part 225, Control of Emissions from Large Combustion Sources amended by the

Temporary Technology Based Standard ("TTBS") and the Multi-Pollutant Standard ("MPS")

provisions.

Ameren fully supports the Governor's and the Illinois Environmental Protection

Agency's ("Agency") goal of significantly reducing mercury emissions from the state's

coal-

fired electric generating units ("EGUs"). During the course of these proceedings, Ameren

provided

the Board with detailed written testimony and two days of oral testimony from its

witnesses that compliance with the Agency's proposed mercury rule with the addition of the

MPS is both technically feasible and economically reasonable. Ameren further provided

testimony that the proposed rule as amended by the MPS balances the Agency's environmental

goal of establishing effective mercury controls while supporting industry's goal of a more stable

and certain regulatory framework. Therefore, Ameren respectfully requests that the Board adopt

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the Agency's proposed mercury rule with the amended language as presented by Dynergy

Midwest Generation, Inc. on August 21,2006.

INTRODUCTION AND PROCEDURAL HISTORY

The proposed rulemaking now before the Board is intended to meet the State of Illinois'

obligations under the federal Clean Air Act ("CAA"), 42 U.S.C.

7401, et seq. and to satisfy the

requirement to submit a state plan under the federal Clean Air Mercury Rule ("CAMR"), 70 Fed.

Reg. 28606. In CAMR,

USEPA established an annual budget for mercury emissions from coal-

fired EGUs for selected states, including Illinois, for 2010 and thereafter. See, 70 Fed. Reg.

28649-50.

Each state's plan under CAMR must contain appropriate emission control

requirements and compliance procedures to assure compliance with the state's annual mercury

budget by specified dates.

Id. Under CAMR, "[sltates remain authorized to require emission

reductions beyond those required by the State Budget" and nothing in CAMR precludes

"[sltates

from requiring such stricter controls" than the federal rule.

Id.

at 28632. CAMR further requires

states to submit these plans to the

USEPA by no later than November 17, 2006. 70 Fed. Reg.

28649; 40 CFR

60.24(h)(2).

To address these CAMR requirements, the Agency filed the proposed 35 Ill. Adm. Code

Part

225 rules on March 14, 2006, to control the emissions of mercury from Illinois EGUs. The

Agency's proposal requires that, beginning July 1, 2009, the owner or operator of

an Illinois

EGU system comply with one of the following standards on

a rolling 12-month basis: (1) An

emission standard of 0.0080 lb mercurylGWh gross electrical output; or (2) A minimum 90-

percent reduction of input mercury. Through December 3 1, 2013, the proposed rule allows the

owner or operator of an EGU to comply by means of an Averaging Determination which shows

that the actual emissions of mercury are less than the allowable emissions of mercury from all

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EGUs covered by the Determination on a rolling 12-month basis. The EGUs covered by the

Determination must comply with one of the following emission standards on a source-wide basis

for the period covered by the Determination:

(1) An emission standard of 0.020 lb mercury/GWh

gross electrical output; or (2) A minimum of 75-percent reduction of input mercury. The

proposed rule's emissions standards do not apply to units that are scheduled for permanent shut

down so long as the owner or operator notifies the Agency as provided in the rule.

On May 23, 2006, the Agency filed an amendment to add the TTBS to its proposal to

provide an additional level of compliance flexibility. Under the TTBS, those EGUs that satisfy

relevant eligibility requirements may demonstrate compliance with control requirements for

mercury emissions for a limited time through June

30,

2015. Specifically, to be eligible for the

TTBS,

an EGU must be equipped and operated with emission controls systems that include the

injection of halogenated activated carbon and either

(1) a cold side electrostatic precipitator or

(2) a fabric filer. Further, the TTBS is limited to only 25-percent of the total rated MW capacity

for the owners or operators of more than one existing EGU.

Beginning on June 12,2006, and continuing through June 23,2006, the Board conducted

public hearings in Springfield on the proposed mercury regulations and the TTBS. The Agency

presented testimony supporting the proposed mercury rule and the TTBS. Arneren appeared and

participated in that hearing.

On July 28, 2006, Arneren and the Agency filed the new Section 225.233 MPS

provisions along

with a Joint Statement supporting the inclusion of the proposed MPS

amendments to the Agency's proposed mercury rule. Like the TTBS, the MPS is a voluntary

provision that allows Illinois EGUs additional flexibility in complying with the proposed

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mercury rule. Unlike the TTBS, the MPS provides that compliance flexibility in exchange for

the commitment to make significant and specified reductions in

NOx and SO2 emissions.

Ameren's MPS amendment to the proposed mercury rule provides as follows:

Pollution control equipment installation deadlines for owners and operators of EGUs

covered by Part 225 who commit to achieve by January 1,2012, seasonal and annual

emission rates for

NOx of no more than 0.1 1 lbs/rnrnBtu and an annual emission rate

for

SO2 of 0.33 lbs/mmBtu;

All units with a capacity greater than 90 MW are required to install halogenated active

carbon injection control equipment ("HACI") to reduce mercury emissions by

December 3 1,2009.

By January 1, 201 5, all units with a capacity greater than 90 MW are required to meet

an emission standard of 0.0080 lb

mercury1GWh gross electrical output, or a

minimum 90-percent reduction of input mercury. By January

1, 20 13, all units with a

capacity less than 90 MW are required to install and operate HACI.

These systems are to be operated with specified injection rates that are designed to

prevent noncompliance with regulatory requirements for opacity or particulate matter;

A prohibition of the sale to third parties of SO2 and NOx allowances generated as a

result of compliance with the provisions of Section 225.233;

The Board conducted additional public hearings from August 14, 2006 through

August 23, 2006 in Chicago on the proposed mercury regulations and the

MPS amendments.

Ameren's witnesses, along with representatives from the Agency, presented testimony on the

provisions of the MPS and its technical feasibility and economic reasonableness for two days

during the August hearing. See, Exhibits

75-77; August Tr. at 96-442.

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On August 21, 2006, Dynegy Midwest Generation, Inc. ("Dynegy") and the Agency

submitted a Joint Statement to the Board supporting a slightly revised version of the Ameren

MPS. See, Exhibit

125.' Dynegy7s MPS amendment to the proposed mercury rule provides as

follows:

The "Base Emission Rate" during the ozone season would be the average emission

rate of

NOx from the EGUs subject to the MPS, in pounds per million Btu heat input,

for the 2003 through 2005 ozone season;

The annual NOx emission standard, beginning in calendar year 2012 would be no

more than 0.1 1

lb/mmBtu or a rate equivalent to 52-percent of the Base Annual Rate

NOx emissions, whichever is more stringent;

The annual SO2 emission standard, during calendar years 2013 and 2014 would be no

more than 0.33

IblmrnBtu or a rate equivalent to 44-percent of the Base Rate of SO2

emissions, whichever is more stringent;

The annual SO2 emission standard, during calendar years 201 5 and thereafter, would

be no more than 0.25

lb/mmBtu or a rate equivalent to 35-percent of the Base Rate of

SO2 emissions, whichever is more stringent;

The control technology requirement for emissions of mercury would allow EGUs that

will be controlled by either an

SO2 scrubber or a fabric filter to install a listed sorbent,

an alternative sorbent, or other techniques to control mercury emissions by December

3 1,2009;

The MPS would allow up to 6-percent of the capacity of the MPS group or each

electric generating unit in

an MPS group with a capacity of less than 90 MW electing

This exhibit was resubmitted to the Board on August

23,2006,

in a corrected form.

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to comply with the MPS to postpone installation of a listed sorbent, an alternative

sorbent, or other techniques to control mercury emissions until January 1,201 3;

For any cyclone fired EGU fueled with subbituminous coal that will install a scrubber

and

baghouse by December 31, 2012 that demonstrates a 75-percent reduction in

mercury or an emission rate of 0.02 lb

mercury1GWh of gross electrical output, as of

July

1, 2009, the minimum rate of sorbent injection would be 2.5 pounds per million

actual cubic feet.

In their Joint Statement, Dynegy and the Agency stated that they agree that compliance

with the revised MPS is both technically feasible and economically reasonable.

Id.

The only

minor differences between Ameren's MPS proposal and the subsequent MPS amendment

introduced by Dynegy are in the base emission rates and the required dates for installation of

control technology. Ameren

fully supports the revised MPS amendments

proposed by

Dynegy.

On August 23,2006, Kincaid Generation LLC ("Kincaid") also presented to the Board its

own option for amending the proposed mercury rule.

See,

Exhibit 138. The Kincaid proposal,

however, was submitted without the support of the Agency.

Only Midwest Generation LLC ("MWG) and Southern Illinois Power Cooperative

("SIPC") have indicated continued objection to the proposed mercury rule. Unlike Ameren,

Dynegy and Kincaid, these companies failed to offer any alternative proposals for amendments

to the mercury rule. Furthermore, MWG and SIPC did not present any witnesses

from their own

respective companies to testify at the public hearings on how the proposed mercury rule will

directly impact their companies or whether they are able to comply with the proposed rule as

amended.

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In four weeks of hearings, the Board heard from 27 witnesses, examined 138 exhibits and

received over 6,000 public comments on the proposed rule and its technical feasibility and

economic reasonableness.

The extensive record now before the Board fully supports the

adoption of the proposed rule as amended by the MPS which is technically

feasible,

economically reasonable and will be protective of human health and the environment in Illinois.

THE RECORD SUPPORTS THE MPS AMENDMENT TO THE PROPOSED

MERCURY RULE

Ameren offered the MPS amendments to the proposed mercury rule because a multi-

pollutant approach for controlling the emissions of mercury, SO2 and NOx has numerous

advantages over a traditional, single pollutant regulatory scheme. Since mercury emissions

reductions can be obtained as a "co-benefit" from control devices used to reduce

SO2 and NOx,

it is important for environmental regulations directed at EGUs to allow companies the option of

synchronizing the control of these emissions in a way that is technically feasible, economically

reasonable and protective of human health and the environment. The MPS provisions contained

in the proposed Illinois mercury rule accomplishes these goals.

Evaluations by Arneren, in conjunction with

Arneren's technical consultants ADA,

revealed that mercury emission reductions that would approach 90-percent removal using current

technologies would require either

a FGD/SCR

system for those units still burning bituminous

coal, or a fabric filter plus sorbent injection for units burning subbituminous coal. See, Exhibit

76. The addition of a fabric filter to a subbituminous unit would also allow the unit to reduce or

cease

SO3 conditioning, and would further improve the performance of the sorbent over an ESP

configuration.

Id.

The installation of fabric filters in these applications, however, is

substantially more expensive than an ACI-halogenated sorbent system and would take much

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longer to design, procure and install.

Id.

Ameren therefore concluded that fabric filter

installations on subbituminous units, and

SCR/FGD or fabric filters on bituminous units, would

need to be coordinated with the company's overall

NOx and SO2 emissions reduction strategy.

Ameren would also need to install these emission controls to comply with CAIR.

Accordingly, Ameren developed the alternative MPS proposal of general applicability to

be included within the proposed mercury rule that would reduce mercury emissions in a way that

would satisfy the spirit of the Agency's originally proposed rule as well as making significant

reductions in

NOx and SO2 emissions. On July 28, 2006, after negotiations with the Agency,

Ameren submitted the MPS amendment to the Board.

During the August hearings, Mr. Michael

L. Menne, Vice President of the Environmental

Safety and Health Department for Ameren Services Company, a subsidiary of Ameren

Corporation, along with Messrs. Jim Ross and Christopher Romaine of the Agency, testified

extensively as to how the MPS would be applied and how the MPS fits within the broader

provisions of the proposed mercury rule. See, August Tr. at 100-388.

Specifically, Mr. Menne

testified that the MPS provisions of the proposed rule provide an additional level of compliance

flexibility for mercury controls if the facilities committed to control

SO2 and NOx to specified

levels within certain

timefiames.

See, Exhibit 76. Mr. Menne further stated that the MPS will

meet the state's goal of 90-percent mercury emissions on most units, on a time frame extended

by only three years, as well as making significant reductions in

NOx and S02, above those

required by CAIR. See, Exhibit

75, 76. Thus, Illinois EGUs electing to use the MPS alternative

will provide an additional public health benefit that was not initially included in the proposed

rule or otherwise required by

CAIR.

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In response to questions during the August hearing, Jim Ross, testified that the MPS

provisions are of general availability to all Illinois EGUs. See, August Tr. At 133; 149-50. Mr.

Ross stated that

"[tlhe most obvious candidates, we believe besides hmeren, who we fully

believe will use [the MPS] are Dynegy and Midwest Generation, who have large fleets of

coal-

fired power plants in Illinois."

Id.

at 149-50. In addition, Messrs. Ross and Romaine testified

that the Agency analyzed the

MPS and determined that, even if all Illinois EGUs chose to take

advantage of the MPS option, Illinois will still be under the state mercury caps set by CAMR.

See, August Tr. at 293-327.

Furthermore, Ameren's expert witness, Dr. Anne Smith, an economist and utility

decision analyst, testified during the August hearings that the Agency's proposed rule as

amended by the MPS was economically reasonable for Ameren. See, Exhibit 77; August Tr. at

388-442. Dr. Smith performed an economic cost and benefit analysis of the MPS amendments

and testified that although the total capital expenditures are larger under the MPS

than under the

Illinois rule without the MPS (because of the additional

NOx and SOz controls), these

expenditures are greatly smoothed out, in a manner that should be far more feasible to finance,

and with a far more manageable rate of increase in demands on cash flow.

Id.

Dr. Smith

concluded in her testimony that the

MPS is a prudent trade-off for Illinois EGUs to make "from

the perspective of corporate financial stability, corporate management of construction projects

(with associated operational stability), and the creation of opportunities to achieve these

environmental benefits at a lower ultimate total cost." See, Exhibit 77.

While the MPS is entirely voluntary, it is available to all Illinois EGUs. Both Ameren

and Dynegy testified before the Board that they believe that the MPS provisions are both

technically feasible and economically reasonable for their respective systems and they intend on

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taking advantage of the MPS. Other Illinois EGUs may also take advantage of the MPS as well

and presumably they will do so if it fits within their compliance plans. However, if other Illinois

EGUs ultimately determine that the MPS provisions are not technically feasible for their

systems, the proposed rule allows them to utilize either the TTBS, the output based standard or

the percent reduction standard to attain compliance

with the Agency's proposed mercury rule.

Therefore, the record fully supports the proposed Illinois mercury rule as amended by the

MPS.

THE BOARD CAN ADOPT THE PROPOSED MERCURY RULE AND THE MPS

AMENDMENTS WITHOUT LIMITING ITS AUTHORITY IN THE UPCOMING CAIR

RULEMAKING

At the close of the August 2006 public hearings in Chicago on the proposed mercury rule,

the Hearing Officer requested clarification from the parties on how the Board can best handle the

interaction between the MPS and the Board's upcoming CAIR rulemaking (proposed 35 Ill.

Adm. Code 225, Control of Emissions from Large Combustion Sources; R06-26).

See,

August

Tr. at 1877.

As stated above, the MPS is a voluntary provision that requires the commitment of

Illinois EGUs that opt into the MPS to achieve specified

NOx and SO2 limits as a pre-condition

for

an extended schedule for mercury controls. While Illinois EGUs that take advantage of the

MPS are required to make reductions in

NOx and SOz, nothing in the MPS limits in any way the

Board's authority to adopt

NOx and SO2 limits in the upcoming CAIR rulemaking or in any

other future rulemakings.

Importantly, the adoption of the MPS requires no determination by the Board that the

NOx and SO;! controls in the MPS provisions are sufficient to attain CAIR or future non-

attainment limits. The Board will have a complete opportunity to hear testimony, evaluate and

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adopt appropriate CAIR limits during the upcoming CAIR hearings. Thus, there is absolutely no

conflict between the MPS provisions in the Agency's proposed mercury rule and the pending

CAIR rulemaking and the Board's authority is in no way prejudiced by the MPS amendments.

Rather, the MPS and the proposed CAIR rulemaking will work together to ensure

significant emissions reductions for the benefit of Illinois residents. Indeed, the U.S. EPA

envisioned a regulatory interplay between CAMR and CAIR. In the preamble to

CAMR,

USEPA stated that:

[tlhe advantage of regulating Hg at the same time and using the same regulatory

mechanism as for

SO2 and NOx is that significant Hg emissions reductions,

especially reductions of oxidized Hg, can and will be achieved by the air pollution

controls designed and installed to reduce

SO2 and NOx. Significant Hg emissions

reductions can be obtained as a "co-benefit" of controlling emissions of

SO2 and

NOx; thus the coordinated regulation of Hg, SO2, and

NOx

allows Hg reductions

to be achieved in

cost-effective manner.

See, 70 Fed.

Reg. 28606 (emphasis added). The CAMR preamble further provides that "[tlhe

EPA believes that a carefully designed 'multi-pollutant' approach, a program designed to control

NOx, SOz, and Hg at the same time (i.e. CAIR implemented with CAMR) is the most effective

way to reduce emissions

fiom the power sector." See, 70 Fed. Reg. 28617.

Additionally, the concept of an

MPS in state mercury rulemaking proceedings is a

regulatory approach that is supported by both Lake Michigan Air Directors Consortium

("LADCO") and that has been adopted by other states.

As discussed by Mr. Ayers during the

June hearings and Mr. Ross during the August hearings, LADCO identified a multi-pollutant

strategy in its white paper on state mercury emission controls. See, June 20, 2006 Tr. at 62-4;

August Tr. at 206. Further, the New Jersey Department of Environmental Protection issued state

mercury regulations in 2004 with a multi-pollutant strategy that calls for a 90-percent reduction

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in mercury from that state's coal-fired EGUs but allows an extended compliance schedule if the

EGUs make reductions in

SO2, NOx and fine particulate emissions. See, N.J.A.C. 7:27 et seq.

MWG's technical expert, Mr. Ed Cichanowicz spoke to the value of a multi-pollutant

strategy in his written testimony and during the August hearings in response to questions. See,

Exhibit 84; August Tr. 1008-09. Specifically,

Mr. Cichanowicz testified that "[c]oupling Hg

compliance to

SO2 and NOx reduction

in terms of both equipment and schedule

provides the

most cost-effective and reliable compliance path."

Id.

While the MPS requires NOx and SO2

controls, the coordination of those controls and CAIR will be determined in the CAIR hearings.

The Board need only recognize that a multi-pollutant approach is widely utilized and represents a

viable and useful counterpart to the Agency's mercury reduction strategy.

MIDWEST GENERATION'S POSITION THAT THE PROPOSED RULE VIOLATES

STATE

AND FEDERAL LAW IS MISPLACED

A. The Proposed Mercury Rule is Consistent with State Law

MWG argued during the first day of the August hearings and in its Motion to Schedule

Additional Hearings that the Board lacks the authority to adopt rules directed at specific

companies or operations in the context of general rulemakings. Yet this argument is completely

contradicted by the sweeping language of Section

27(a) of the Illinois Environmental Protection

Act (415

ILCS 91, et seq.; "Act") which describes the Board's authority to adopt regulations.

Section

27(a) authorizes the Board not only to adopt state wide regulations but also to adopt

regulations that "may make different provisions

as required by circumstances for different

contaminant sources and for different geographical areas.. .and may include regulations specific

to individual persons or sites."

See,

415 ILCS 5/27(a). This language clearly authorizes the

Board to include in regulations of general applicability different provisions as required by

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different sources and different areas and regulations specific to individual companies. The

breadth and flexibility of this language plainly allows the Board to adopt the MPS which allows

sources to elect different compliance strategies. Indeed, it would be hard to imagine more direct

statutory authority for the Board to adopt the proposed rule with its amendments.

MWG's reliance on Commonwealth Edison Co.

v. Pollution Control Board, 25 I11.App.

3d 271

(lSt

Dist. 1974) is completely without merit. That case involved a challenge to a rule of

general applicability by a company which claimed that the Board's air rules were "arbitrary and

capricious" only as they were applied to that company. See, 25

I11.App. 3d 271 at 280-1. The

court rejected this "as applied" argument as a basis for challenging the rule pointing out that the

Board could not be expected to adopt rules which fit every company and that the Act provided

specific statutory relief for individual companies who could claim that the general rule imposed a

specific and different hardship. Id. The court, in dicta, stated that the legislature had determined

that the appropriate remedy for companies that are unable to comply with a rule of general

application is to seek a variance in accordance with the Act. See, 25

I11.App. 3d 271 at 281.

MWG's argument fails because the court held only that the Board could choose not to

make exceptions in general rules for individual companies and never held that the Board lacked

the authority to make such exceptions. The court's decision is completely inapposite since it

addressed a company aggrieved by the impact of a general rule on that company and directed the

company to statutory mechanisms provided for such companies to seek relief. At no point did the

court state that the Board was not authorized to adopt different rules for different situations, nor

could it so hold since Section

27(a) specifically allows the Board to adopt such rules.

Finally, MWG's argument has no basis since none of the proposed rule's provisions are

directed at specific Illinois

EGUs. As stated above, the proposed mercury rule allows flexibility

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for different EGUs to determine how they will ultimately comply with the rule including an

output based standard, a percent reduction standard, the TTBS and the MPS.

All of these

compliance options, including the MPS, are generally available to Illinois EGUs and are not

company specific. The fact that MWG may choose not to use the MPS or these other flexibility

mechanisms has no bearing on whether the Board has authority to adopt it.

Thus, despite

MWG's arguments, the Act clearly authorizes the Board to adopt the MPS.

B. The Proposed Mercury Rule is Consistent with Federal Clean Air Act

MWG also argued during the hearing and in its motion for additional hearing that the

MPS was barred by constitutional considerations expressed in the cases involving New York's

air statutes. This case involved a challenge to a New York statute which limited the ability of

New York EGUs to sell allowances to upwind EGUs. As will be discussed in more detail below,

the District Court held that the statute was pre-empted by Title IV of the

CAA and barred by the

Commerce Clause of the U.S. Constitution. The Second Circuit upheld the District Court's pre-

emption ruling and did not address the Commerce Clause issues. For reasons discussed below,

these cases are inapplicable to the MPS which is significantly different from the New York

statute in that it is voluntary and because it has no direct impact on either out-of-state EGUs or

in-state EGUs who choose not to participate. Therefore the Illinois mercury proposal with the

MPS is consistent with federal law.

The MPS is not Pre-empted by the CAA

In Clean Air Markets Group

v.

Pataki, the 2nd Circuit determined that the New York

statute effectively restricting sales of allowances by New York generators to sources in certain

identified upwind states, was pre-empted by Title IV of the Clean Air Act. Clean Air Markets

Group

v. Pataki, 338 F.3d 82 (2d Cir. 2003). The court determined that while the New York law

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was not expressly preempted by Title IV, nor was it preempted because Title IV was deemed so

comprehensive as to occupy the entire filed of state law relating to emissions control, it was

preempted because it actually conflicts with federal law in that it "interferes with the method

selected by Congress for regulating

SO2

emissions," and therefore was an impermissible

obstacle to the

N1 implementation of the federal ~tatute.~

Id. at

87.

Specifically, the court

concluded that the geographical restriction on allowances sales conflicted with Title

IV's

mandate that allowances be freely transferable "to any other person."

Id.

88.

The New York statute effectively took any revenues received from sales of

SOX

allowances by New York EGUs to sources located in several "upwind states" (certain states

whose emission sources had been determined to contribute to

SOX

transport into New York), and

required New York EGUs to place restrictive covenants on any allowances sold elsewhere to

ensure that such allowances would not be resold to the identified upwind states. The effect of the

statute was to decrease the value of allowances sold by New York EGUs (because of the

restrictive covenant), and to likely increase in some small measure the costs of compliance for

sources located in the upwind states.

Unlike the New York law at issue in Clean Air Markets Group, the

MPS

is a voluntary

provision and thus does not in any way conflict with Title IV. The New York law imposed its

effective ban upon sales of allowances to sources in the upwind states unilaterally and without

the consent of the allowance holder. In contrast, EGUs in Illinois may elect to be covered by the

MPS, in which case they agree to comply with the allowance requirements.

The Court also found that a conflict existed because Congress had considered and rejected the idea of

imposing geographical restrictions on allowance trading, which the New York statue now imposed.

Id. at 88. The

MPS contains no geographical restrictions, and hence that is not an issue here.

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The voluntary MPS election eliminates the concern of the

Clean Air Markets Group

court

that the allowance surrender provision directly conflicts with Title

IV's mandate that allowances

be freely transferable "to any other person." By making such an election, Illinois

EGUs are

agreeing "freely" to transfer excess

SOX allowances to the state for retirement as specifically

allowed under Title IV. Since the

Clean Air Markets Group

court specifically acknowledged

that "to implement [the Title IV] scheme on a national basis," Title IV specifically permits

allowances to be transferred to "any other person," and the MPS is wholly consistent with that

approach, there is no conflict between the MPS allowance requirements and the methods

Congress provided to implement Title IV.

at 88.

The MPC also avoids the

Clean Air Markets Group

court's concern that the New York

statute would undermine Congress' goal of obtaining efficient and cost-effective reductions

through an emissions allocation and transfer system.

Id.

87.

Since Congress specifically

permitted any person to buy and hold or retire allowances, it could not have presumed that freely

elected allowance retirements in any way undermined its objectives to implement the emission

reductions required under Title IV. U.S.

EPA's Clean Markets Division, which administers the

Title IV allowance trading program has a specific program to facilitate these transfers and

procedures to effectuate such transactions. The Clean Markets division also acknowledges that

environmental groups and corporations without actual emissions can purchase and surrender

allowances. Consequently, Title IV authorizes sources to freely elect to transfer allowances to

the state for retirement and the MPS cannot be deemed to be in conflict with it.

The Court also indicated that the New York statute was inconsistent with U.S. EPA's

regulation that prohibits state Acid Rain permit programs

from restricting or interfering with

allowance trading in ways that are inconsistent with the acid rain

program.

C.F.R

72.72(a).

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This provision is not, however, applicable to the MPS. The MPS allowance requirements only

become an applicable and compulsory state requirement when the source elects to make it so,

and which the source is entitled to do under Title IV's free transfer of allowances provision.

Consequently, the state is not "interfering" in any way with allowance trading; to the extent there

is any "interference," (and the ability of sources to retire allowances under Title

IV's indicates

there is not), it is the source which that elects to "interfere"

with allowance trading, and that it is

entitled "freely" to do.

Further, the U.S. EPA takes the position allowance trading scheme resulting in allowance

surrenders are appropriate under Title IV. Indeed, U.S. EPA addressed the conclusions of the

Clean Air Markets Group

when it finalized its CAIR rule. 70

Fed. Reg.

25 162,25293-95 (May

12,2005). In CAIR, U.S. EPA requires that states or sources subject to CAIR surrender an

amount of Title IV allowances equal to the difference between the applicable

CAIR cap and the

Title IV allowance allocation, as "excess" allowances;

i.e., "beyond Title IV." Id. at 25294. In

addition, U.S. EPA has entered into ten NSR consent decrees with utility companies, and in each

of these it has required the utility companies to surrender

SOX allowances. Each of the decrees

has been presented by U.S. EPA to

federal district court for approval and entry, with U.S. EPA

asserting that the decrees are

lawful. The standard to be applied by the courts in reviewing the

decrees for approval is whether the consent decree is fair, adequate and reasonable and consistent

with applicable law.

Mtro. Hous. Dev. Corp.

v.

Vill. of Arlington Heights,

61 6 F.2d 1006, 1014

(7'

Cir. 1980). Based upon this standard, the courts have approved these decrees, including

most recently a decree involving

Dynegy's Illinois operations.

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Consequently, allowance surrender or retirement requirements are consistent with federal

law.

MWG's argument that the

CAA

preempts the MPS is not supported by the case law or the

language of the MPS.

The MPS is Lawful Under the Commerce Clause

MWG fwther argues, based on the District Court's decision in Clean Air Markets Group

v. Pataki, 194 F.Supp. 2d 147 (N.D.N.Y 2002), that the MPS requirement that unused SOX

allowances be retired or surrendered to the state, and not sold or traded to any other person, may

violate the Commerce Clause. Again, this argument is unsupported. The MPS allowance

surrender requirement has several distinct differences from the New York statute that makes the

MPS a lawful, non-discriminatory regulation, fully consistent with constitutional protections.

The MPS is a Permissible Even-Handed Regulation that Does Not

Discriminate Against Interstate Commerce

Statutes violate the Commerce Clause if they impermissibly discriminate against

interstate commerce. CTS

Corp. v. Dynamics Corp. of America, 481 U.S. 69, 87 (1987) ("The

principle objects of dormant Commerce Clause scrutiny are statutes that discriminate against

interstate commerce."). Such a statute is "per se invalid," unless it can be demonstrated "under

rigorous scrutiny" that the objective of the statute is legitimate, and there is no alternative way to

accomplish the objective.

C&A Carbone,

Inc.

v.

Town of Clarkstown, 51 1 U.S.

383,392 (1994).

If the statute is not found to be discriminatory, it will be upheld, "unless the burden imposed on

such commerce is clearly excessive in relation to the putative local benefits." Pike

v. Bruce

Church, 397 U.S.

137, 142 (1970).

Consequently, "the first step in analyzing any law subject to judicial scrutiny under the

negative commerce clause is whether it regulates evenhandedly," with only incidental effects on

interstate commerce, or whether it "discriminates against interstate commerce." Oregon Waste

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Systems v. Dep 't of Env. Quality of Ore.,

51 1 U.S. 93, 99 (1994). "The central rationale for the

rule against discrimination is to prohibit state or municipal laws whose object is local economic

protectionism

. . . "

C&A Carbone

at 390.) Discrimination under the Commerce Clause "simply

means differential treatment of in-state and out-of-state economic interests that benefits the

former and burdens the later.''

Oregon Waste Systems,

U.S. at 99. Thus, when New Jersey

sought to conserve its dwindling landfill space by

banning most imports of out-of-state solid

waste, the Supreme Court concluded that the statute discriminated against interstate commerce

because "it imposes on out-of-state commercial interests the full burden of conserving the State's

remaining landfill space."

City of Philadelphia v. New Jersey,

437 U.S. 617, 628 (1978). That

is, all of the benefits of the statute, in the form of greater landfill capacity, flowed to New Jersey,

while all the burdens of the statute were imposed upon the rest of the states, whose citizens were

deprived of access to New Jersey's landfills.

For similar reasons, the

Clean Air Markets Group

court struck down the New York

statute, concluding that since the law did not restrict or penalize transfer of allowances between

New York generators, "it gave a preferred right of access to

SO2 allowances to in-state units over

units in the Upwind States, and is therefore protectionist."

Clean Air Markets Group

at 161.

Thus, under the New York statue, as in

City

Philadelphia,

in-state interests were benefited at

the expense of out-of-state interests in the upwind states.

This infirmity is not present in the MPS. The MPS requires that excess allowances be

retired or be surrendered, and provides no exceptions to that rule. Since both in-state and out-of-

state utilities are deprived of access to the allowances that otherwise might have been sold, the

regulation's burdens are shared equally by in-state and out-of-state generators, and no

Carbone

makes clear that "economic protectionism" is the evil sought to be avoided, and that the hallmark

of "economic protectionism" is "discrimination."

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preferential access to the allowances to be retired is given to Illinois generators. Consequently,

existing EGUs in Illinois that do not participate in the MPS, new EGUs that are constructed

within the state, and existing and any new oil and gas units in the state subject to Title IV share

the same burdens that may be attendant to the loss of some allowances in the Title IV acid rain

market as their out-of-state counterparts. The absence of unique preferences for in-state units, or

imposition of burdens uniquely borne by out-of-state units, is the hallmark of permissible

evenhanded impacts on interstate commerce.

The Supreme Court repeatedly held that even-handed legislation that imposes no greater

burden on out-of-state entities than on in-state entities is not discriminatory. In

CTS Corp.

Dynamics Corp. ofAmerica, 481 U.S. 69 (1987), the Court upheld an Indiana statute that had the

effect of conditioning acquisition of control of an Indiana corporation on approval of a majority

of the pre-existing disinterested shareholders because "It has the same effects on tender offers

whether or not the

offeror is a domiciliary or resident of Indiana. Thus it "visits its effects

equally upon both interstate and local businesses."

CTS Corp.

at 87, quoting

Lewis

Investment

Managers,

Inc., 447 U.S. 27,

36-37

(1980). The Court repeated the argument that

anti-takeover statute would apply more often to out-of-state entities than in-state entities (there

being far more out-of-state corporations than in-state), reasoning: "nothing in the Indiana Act

imposes a greater burden on out-of-state offerors than it does on similarly situated Indiana

offerors, we reject the contention that the Act discriminates against interstate commerce."

CTS

Corp.

at 88.

The MPS passes constitutional muster because like the statutes discussed in

CTS Corp.,

the MPS provides no preferences for in-state consumers of allowances and treats them

identically to their out-of-state counterparts. Although its impacts may apply more often to out-

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of-state entities (there being more out-of-state EGUs than in-state EGUs), the Supreme Court

makes clear that this consideration does not matter, provided both groups are equally burdened.

The MPS Passes Muster Under the

Pike

Balancing Test Because the Burdens

on Interstate Commerce Are Not Clearly Excessive in Relation to the Local

Benefits

Even though the Clean Air Markets Group court found the statute to impermissibly

discriminate against interstate commerce, it proceeds to evaluate it under the Pike balancing test

applicable to statutes found not to discriminate and found that it failed that test. Pike

v. Bruce

Church, 397 U.S. 137 (1970).

The court reasoned that the goal of the statute did not have a

sufficient connection to its requirements

(i.e., it was unlikely to accomplish its objectives), and

that it imposed a "burden" on interstate commerce by halting certain transfers of allowances

despite a federal scheme intended to promote free transfer of such allowances. However, it is

clear that the court applied rationales that are inapplicable to the different factual situation

presented by the MPS surrender requirement.

The Pike balancing test requires two assessments: (1) whether the statute effectuates a

legitimate local public interest; and (2) if it does, whether the burdens it imposes on interstate

commerce are clearly excessive in comparison to the identified local benefits. Pike

v. Bruce

Church, 397 U.S. 137, 142 (1970). The MPS passes

both of these tests and cannot be found to

impermissibly burden interstate commerce.

The local benefits of the MPS reflect a legitimate local concern and are properly

effectuated through the allowance requirements.

Plainly, Illinois' interest in reducing

SOz

impacts in Illinois is as legitimate a local concern as reducing acid rain. Unlike the New York

statute, the specific purpose of the Illinois allowance surrender requirement is to ensure that a

suite of newly-freed up allowances produced by the required emission reductions in the MPS are

ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, SEPTEMBER 20, 2006

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not used by other sources near Illinois to increase emissions, or to avoid controls that would

otherwise be undertaken. By retiring the allowances

freed up by the MPS' beyond-CAIR

emission reductions, the state is assured that the reductions it obtains in Illinois will be

firm, 

and

will not be undone by other sources using allowances from MPS sources to avoid controls, and

thereby increase (or fail to reduce) emissions elsewhere. That is clearly a legitimate public

interest, and its result is absolutely assured ("guaranteed") through the retirement requirement.

This goal is both a legitimate and

lawfUl approach because U.S. EPA follows when it

enters into consent decrees requiring system-wide reductions in

SOX emissions to settle NSR

suits. EPA has now entered into 10 consent decrees with major coal-fired utility systems

resolving alleged NSR violations. Under these decrees, EPA requires most of the units to install

state-of-the-art controls for

SOX and NOx, and each of these decrees requires that the utility

systems surrender

SOX allowances that are equal to the amount of reductions the SOX controls

required under the decree are expected to produce.

Further, the MPS' burdens on interstate commerce are not clearly outweighed by the

regulation's benefits to the state. The

2nd Circuit articulates the second step in the

Pike

test as

requiring the statute to be upheld if

"a reasonable factfinder could not have found that whatever

incidental burdens exist were 'clearly excessive' in relation to the local benefits."

New York

State Trawlers

Assoc.

Jorling,

16 F.3d 1303, 1309 (2nd Cir. 1994).

The

Clean Air Markets

Group

court did not explicitly assess the burdens on commerce, except to suggest that the

allowance sale restrictions conflicted with a "federal system designed for free transferability of

SO2 allowances."

Id.

Yet, the MPS surrender requirement will affect a relatively small amount of SOX

allowances, both because Illinois' total

SO2

allocation is but

fraction of the total amount of

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allowances allocated, and because only a subset of Title IV sources in Illinois will be subject to

the surrender requirement (coal-fired units that elect the MPS). This relatively small impact is

unlikely to amount to an appreciable burden in interstate commerce, or the functioning of the

Acid Rain trading program. Indeed, U.S. EPA itself appears to believe that such a surrender

requirement is only inconsequential. In its ten NSR settlements, well over 100,000 tons of

SOX

allowances per year must be surrendered. The amount to be surrendered under these decrees

will be in excess of any amount to be surrendered under the MPS. Yet EPA has not found such a

surrender requirement to be burdensome, or to harm the functioning of the allowance market,

and indeed has found allowance surrenders to be in the public interest. In addition, the Clean

Air Act itself specifically permits allowance surrenders. See, 42 U.S.C.

7651b(b).

Under these facts, where the benefits to the state are substantial in that they preserve the

integrity of the MPS emission reductions, and are recognized as important benefits by U.S. EPA

in its NSR settlements, and where the burden on commerce is speculative in the first instance,

nominal at its worst, and similar burdens have been found to be acceptable by the agency

charged with administering the statute that created the commerce, a reasonable factfinder would

not be able to find that the burdens on interstate commerce are clearly excessive in relation to the

local benefits.

WHEREFORE, for the reasons stated in

Ameren's Post-Hearing Comments, Ameren

respectfully requests the Board to adopt the Agency's proposed mercury rule as amended.

ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, SEPTEMBER 20, 2006

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AMEREN ENERGY GENERATING

COMPANY,

AMERENENERGY RESOURCE

GENERATING COMPANY, and ELECTRIC

One of GT&orneys

Date: September 20,2006

James

T. Harrington

David L.

Rieser

Jeremy R. Hojnicki

Attorneys for Petitioners

McGuire woods LLP

77 West Wacker, Suite 4 100

Chicago, Illinois 60601

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IN THE MATTER OF:

PROPOSED NEW 35 ILL. ADM. CODE 225

)

CONTROL OF EMISSIONS FROM

)

LARGE COMBUSTION SOURCES

)

RO6-25

(Rulemaking

Air)

NOTICE OF FILING

TO: Those Individuals as Listed on attached Certificate of Service

Please take notice that on September 20,2006, the undersigned caused to be filed with the Clerk

of the Illinois Pollution Control Board the attached

Ameren's Post-Hearing Comments, a copy of

which is herewith served upon you.

Dated this

2ofh day of September, 2006.

Respectfully submitted,

AMEREN ENERGY GENERATING COMPANY

AMERENENERGY RESOURCES GENERATING

COMPANY

James T. Harrington

David

L. Rieser

Jeremy R.

Hojnicki

Attorneys for Petitioners

McGuireWoods LLP

77 West Wacker, Suite 4100

Chicago, Illinois 6060 1

Telephone:

3 121849-8 100

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CERTIFICATE OF SERVICE

The undersigned, one of the attorneys for Petitioners, hereby certifies that I served a copy of the attached document,

Ameren's Post-Hearing Comments, upon those listed below on September 20, 2006 via First Class United States Mail, postage

prepaid.

To:

John

J. Kim, Managing Attorney

Charles E. Matoesian, Assistant Counsel

Gina Roccaforte, Assistant Counsel

Illinois Environmental Protection Agency

Division of Legal Counsel

1021

North Grand Avenue East

Post Office Box

19276

Springfield, IL

62794-9276

Marie E. Tipsord, Hearing Officer

Illinois Pollution Control Board

100

West Randolph, Suite

11-500

Chicago, IL

60601

Bill S. Forcade

Katherine

Rahill

Jenner

Block LLP

One IBM Plaza

Chicago, IL

6061

Bruce Nilles

Sierra Club

2 14

N. Henry Street, Suite

203

Madison, WI

53703

William A. Murray

Special Assistant Corporation Counsel

Office of Public Utilities

800

East Monroe

Springfield, IL

62757

Faith E. Bugel

Howard A. Learner

Meleah Geertsma

Environmental Law and Policy Center

East Wacker Drive, Suite

1300

Chicago, IL

60601

S. David Farris

Manager, Environmental, Health and Safety

Office of Public Utilities, City of Springfield

201

East Lake Shore Drive

Springfield, IL

62757

Dianna Tickner

Prairie State Generating Co., LLC

701

Market Street, Suite

781

St. Louis, MO

63101

Ms. Dorothy Gunn, Clerk

Illinois Pollution Control Board

James R. Thompson Center

100

West Randolph Street

Suite

1 1-500

Chicago, IL

60601

Mr. Keith Harley

Chicago Legal Clinic, Inc.

205

West Monroe,

Floor

Chicago, IL

60606

Kathleen C. Bassi

Sheldon A.

Zabel

Stephen J. Bonebrake

Joshua R. More

Glenna L. Gilbert

Schiff

Hardin LLP

6600

Sears Tower

233

South Wacker Drive

Chicago, IL

60606

Christopher W. Newcomb

Karaganis, White

Mage, Ltd.

4 14

North Orleans St., Suite

8 10

Chicago, IL

60610

N. LaDonna Driver

Katherine D. Hodge

Hodge

Dwyer Zeman

3150

Roland Ave., P.O. Box

5776

Springfield, IL

62705-5776

James 

W. Ingram

Senior Corporate Counsel

Dynegy Midwest Generation, Inc.

1000

Louisiana, Suite

5800

Houston, TX

77002

Daniel McDevitt

Midwest Generation

440

South LaSalle Street, Suite

3500

James T. Harrington

David

L. Rieser

Jeremy R. Hojnicki

McGuireWoods LLP

77 West Wacker, Suite 4100

Chicago, Illinois 6060 1

Telephone:

121849-8 100

ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, SEPTEMBER 20, 2006

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